1 Inquiry into the National Shipbuilding Strategy APPG Foreword As an island nation, the United Kingdom’s security and prosperity has long been associated with the seas. With the UK preparing to leave the European Union, our country’s maritime dependence is more apparent than ever and uncertainty about the UK’s sovereign capability to produce warships remains. The National Shipbuilding Strategy outlined the Government’s aspirations to reform naval procurement by reintroducing greater competition into UK shipbuilding. UK shipbuilding is primarily driven by military sources of demand and long-term national security considerations. Following its inquiry, this APPG recognises the political case for retaining the UK’s sovereign capability to produce warships. We further recognise that the UK’s position as a producer of world-class warships should be understood more widely. UK Shipbuilding has evolved from the smokestack and panel-beating industry it once was. It is now at the very forefront of innovative technologies and capabilities, as can be observed by the export success of the Type 26 frigate. However, the current ‘feast or famine’ nature of military demand threatens our ability to maintain the sovereign capability to produce warships. The National Shipbuilding Strategy significantly reduces the scope of ships that the UK is qualified to build and threatens the long-term viability of our fragile shipyards. Its approach to naval procurement is not novel. Its concepts have been tried, tested and have failed before. The very shape of today’s UK shipbuilding industry is a result of rationalisation, following a period of policies urging shipbuilders to compete with each other and yards going bust. Furthermore, the Government’s inability to provide certainty for industry through a secure timeline of contracts endangers the UK’s position as a world leader in shipbuilding. Certainty around future orders, driving industrial drumbeat, would enable private sector shipbuilders and the wider supply chain to invest in infrastructure, facilities and emerging naval technology, thus renewing the UK’s competitive advantage. Secondary economic impact and tax returns to the Exchequer would provide further benefit to the UK as a whole. It must also be further understood that the benefits of investment in shipbuilding are not confined to historical shipbuilding areas alone. Shipbuilding and the supply chain will not make required investments unless the business case stacks up. Shipbuilding is a hugely capital-intensive industry with one of the highest barriers to entry of any major industry in the world. Consolidating a position within the market and securing a reputation for excellence requires strong co-operation between Government, industry and the research and development base. The industry already faces significant redundancies as the aircraft carrier programme runs down, with the subsequent loss of leading-edge skills. Once lost, these skills cannot be quickly regained and the UK’s sovereign capability to produce complex warships will suffer accordingly, as will the UK’s ability to project naval power. The Rt Hon. Kevan Jones MP | Labour | North Durham Anne-Marie Trevelyan MP | Conservative | Berwick upon Tweed Chris Stephens MP | Scottish National Party | Glasgow South West Luke Pollard MP | Labour and Co-operative Party | Plymouth Sutton and Devonport Paul Sweeney MP | Labour and Co-operative Party | Glasgow North East 2 Inquiry into the National Shipbuilding Strategy 3 Inquiry into the National Shipbuilding Strategy CSEU Foreword Ian Waddell, General Secretary of the CSEU Shipbuilding and ship repair have been a fundamental part of our manufacturing history and heritage for hundreds of years. Today, the UK industry is nearing the end of building the Royal Navy’s largest ever ships in the shape of two new state-of-the- art aircraft carriers - HMS Queen Elizabeth and HMS Prince of Wales. The building of these ships occupied yards across the country in a superb example of teamwork and collaboration, with blocks built in shipyards all over the UK being assembled in Rosyth in Scotland. The Carrier Alliance brought together companies that routinely compete with each other and pooled their talents and expertise. The result was two ships that are at the cutting edge of technology, delivered at a cost that compares extremely well with the international market. The project showed what this country can do and was a showcase for the tens of thousands of highly skilled men and women who work in this iconic industry and its supply chains. However, that work is now coming to an end and the CSEU believes that up to 20,000 skilled jobs in shipyards and 20,000 jobs in supply chains are now at risk. There is an urgent need for work to fill these yards. As the National Shipbuilding Strategy highlighted, an end to boom and bust contracts is the best way to ensure that critical skills are retained, and our shipyards can compete in the global marketplace. Unfortunately, rather than build on the success of the Carrier Alliance and put it to work on the next generation of ships, the UK government is seeking to build support ships for the Carrier fleet through the medium of international competition. Meanwhile, UK yards are starved of work and closures and redundancies are already starting to blight the industry. This report, based on evidence from experts in their fields, demonstrates why this is the wrong decision for the UK, our Navy and the workforce and communities in and around our shipyards. It carries the weight of cross-party support and I am pleased to be able to offer our support as the voice of the workers and their families in this industry. There is still time for the government to change course and take a different view on both Fleet Solid Support ships and the Type 31e frigate. There are excellent and compelling reasons for the UK to design, build and maintain the ships that our Royal Navy, Royal Fleet Auxiliary and other public bodies operate. I sincerely hope that the thoughtful and well-argued case made in these pages adds to the debate and helps avert an entirely avoidable crisis in such a superb industry. 4 Inquiry into the National Shipbuilding Strategy Sovereign Defence Capability Procurement decisions made today will have a lasting impact, and policymakers must develop a better awareness of the necessary steps to maintain a sovereign defence capability. Since 2010, the Government has had no defence industrial strategy. The absence of a defender of UK-based defence programmes in Government, through the continual replacement of the Minister of Defence Procurement, has further stifled the preservation of complex military supply chains. Beyond shipbuilding, there is a pressing need to define what measures must be taken to protect sovereign capability across the full spectrum of defence. Particular focus must be afforded to specialised areas such as the manufacture of gearboxes, gas turbines, combat management systems and weapons systems, as well as many other emerging technologies. This granularity of detail must be present in the National Shipbuilding Strategy. It is the responsibility of the Government to ensure the Royal Navy receives its equipment from a leading-edge supply chain and support structure which enables it to maintain its operational advantage. The shipyards that support our Royal Navy should also be considered centres of excellence for producing world-class naval capabilities and the people and skills that form them must be supported. Without this Case study: General Electric, support, the loss of leading-edge skills represented within the Rugby fields of shipbuilding – marine engineering, project management, mechanical engineering, naval architecture – will weaken the In November 2018, the 130-year old General UK’s ability to maintain sovereign defence capability and place at Electric (GE) site at Rugby announced its plans risk UK freedom of action and operational advantage. to close its Power Conversion plant and move operations to France by the end of 2019. For the construction of warships, we cannot turn skills and the supply chain on and off like a tap. Long-term planning and a The site first supplied technological systems for steady workstream allow shipbuilders and the supply chain to plan the Royal Navy in the First World War. The site efficiently, and the experience and skills in specialised defence has also made the very high specification ultra- sectors to be preserved. In the immediate future, the construction quiet motors needed for submarine hunting for of fleet solid support ships domestically would contribute to the the first three Type 26 Frigates. Around 90% of industrial drumbeat required to retain skills to build warships. the current Naval Service fleet have GE-made electrical equipment on board. Shipbuilding should represent a core component of any defence industrial strategy. Policymakers must recognise the diffuse The factory has been built up over decades with nature of the modern shipbuilding industry, which leverages wide- considerable investment. It is a large, complex supply chains spread across the length and breadth of the United plant which would cost millions to relocate. Kingdom and has a skills profile comparable to aerospace and More valuable even than the plant itself is the other advanced engineering industries. existing workforce of dedicated people with decades of accumulated specialist experience in A cross-government strategy is required to ensure that sovereign naval electrical component manufacture. defence capability runs like a golden thread through all defence procurement decisions in order to preserve the UK’s ability to Currently, the naval facility in Rugby has a develop world-class future sovereign capabilities. stand-alone IT network, which must be approved by the MoD as cyber-secure. To Creating a defence industrial strategy would require not just procure, install and test new IT infrastructure in political will but an overarching perspective that looks beyond the France would incur significant delay over short-term costs of the MoD and instead at a holistic industrial several years.